Irish financial services sector struggles with skills, AI and cybersecurity

30 May 2019

Dervla McCormack, financial services consulting partner at PwC Ireland. Image: PwC

There are fears that the current skills deficit could impact the pace of fintech development.

Ireland’s financial services sector, including a growing fintech community, risks being undermined by the pace of technological change and the shortage of skills.

Data gleaned from PwC’s 2019 CEO survey has found that the skills deficit is more acute in Ireland than globally, with 84pc of Irish financial services CEOs concerned about the availability of key skills, compared with 76pc globally.

‘The skills required to support this evolution of financial services are broader than required in the past’

Financial services leaders are also more concerned about cybersecurity (88pc) compared with their global counterparts (81pc).

Failing to engage with start-ups is a missed opportunity

Just a quarter of Irish financial services CEOs reported to be planning to collaborate with innovative start-ups compared with 30pc of global leaders.

The survey found that there is more to be done on embedding AI in the sector in Ireland. Just 34pc of Irish financial services leaders admitted to having no plans to pursue AI initiatives compared to 23pc globally.

An overwhelming number of financial services CEOs (81pc) are of the view that Government needs to develop a national strategy for AI.

Irish financial services leaders are also less likely to embark on new strategic alliances and joint ventures (22pc) compared to their global counterparts (37pc). They also see less potential for new mergers and acquisitions.

“Collaborations with innovative start-ups are often a good way to access new talent, technology, markets and products as well as countering fee pressures,” said Ciarán Kelly, advisory leader at PwC Ireland.

“Fintechs, for example, often present opportunities to team up, matching their culture of innovation with an established financial services firm’s brand, distribution and regulatory expertise. There is also a growing interest in insurtech and blockchain capabilities – for example, often in partnership, as a source of talent and innovation. These platforms can not only introduce new innovations but can also vastly improve effectiveness and efficiency, especially in cost-intensive areas such as the customer-facing front office.”

The opportunity and impact of SCA

Speaking with, Dervla McCormack, financial services consulting partner at PwC Ireland, said that the forthcoming Strong Customer Authentication (SCA) directive as part of PSD2 could be a game-changer for Irish-based financial services organisations and banks.

“PSD2 provides a framework whereby customers who agree to make their data available can benefit from trusted third parties having access to their information across multiple financial institutions platforms,” McCormack said.

“This enables a customer’s financial institution to provide new services based on a composite financial picture for their customer. SCA aims to provide more robust security for customers in relation to access to their financial information by using access mechanisms such as fingerprint access combined with another form of authentication such as a password – thus termed ‘two-factor’.

“Both of these developments will facilitate the evolution of financial services firms, from providers of products to providers of plug-and-play services and ultimately to lifestyle partners, who will be cash-free, customer-centric, ubiquitous parts of customers’ day-to-day activities. This evolution in financial services will drive innovation and, while the pace of change in Ireland is not as fast as it is in global markets, many Irish banks are both actively engaging with third parties and building strategic alliances to provide access to their platforms, and looking at strategic acquisitions of fintech firms.”

But, once again, the biggest inhibitor to growth could be the ongoing skills deficit.

“The skills required to support this evolution of financial services are broader than required in the past,” said McCormack. “They include customer engagement, data analytics, coding, digital and technology skills, and there are currently shortages in all of these areas in Ireland.

“All of these technological developments in the provision of financial services need to be made against a backdrop of adhering to financial regulations and managing the risk associated with the changes. And consequently, this pace of change is putting pressure on the need for regulatory and risk skills, too.”

She concluded: “This is certainly impacting the pace of fintech development but to address this, many organisations are seeking international input either through recruitment of international workers or through leveraging fintech developments within their global operations. Recent investment by Government and the financial services industry in Ireland in developing these skills is certainly positioning Ireland as a strong fintech player but, given the expected scale of development, there is more that can be done.”

John Kennedy is a journalist who served as editor of Silicon Republic for 17 years